Please Hold Your Bernanke Applause … The plutocrats are heralding Ben S. Bernanke's eight years as Federal Reserve chairman. And with good reason. After all, Bernanke's two signature achievements – bailing out the bankrupt financial system and serving as the architect of the cheap-money policy known as quantitative easing – have done the very things the wealthy hoped they would. They re-established the status quo on Wall Street after the 2008 financial crisis, and reignited the Dow Jones Industrial Average, which is more than 140 percent higher than its March 2009 nadir of 6,500. – BloombergOpinion
Dominant Social Theme: Bernanke, courageous and bold, saved the West, as all central bank leaders tend to do.
Free-Market Analysis: This is a somewhat shocking article appearing at Bloomberg in that it is not a hagiography of former Federal Reserve Chairman Ben Bernanke but a fairly clear-eyed criticism.
Because this intermediary business cycle has not yet come to a thudding halt, there is a window of opportunity that most of the mainstream media is taking advantage of to glorify Bernanke for his "courage" and "innovation."
From our point of view, Bernanke's courage, stoked no doubt by the fine wines and rich viands served at the Fed cafeteria, had more to do with thinking of innovative ways to debauch the currency than any kind of physical heroism.
But … no matter. Like Alan Greenspan before him, Bernanke is being praised in order to define his regime for the history books. Of course, we remember what happened to Greenspan who was briefly commanding a million dollars an hour for his consultations. That all ended when the economy crashed in 2007-2008.
And sooner or later the lionization of Bernanke will end, too. History will remember him simply as another functionary tending to Leviathan by regularly pitching tens of trillions into its great and ever-greedy maw. He did nothing heroic but follow orders. He did nothing out-of-the-ordinary except think of unique ways to expand the monetary abuses he was being paid handsomely to support.
We are not exactly a lone voice crying in the wilderness regarding this issue, but it is surprising to read this critique nonetheless in mainstream Bloomberg commentary. Here's more:
Thanks in large part to Bernanke's policies, the rich have never been richer, and the gulf between the haves and have-nots has never been wider. No wonder billionaires like Bernanke. One example of the praise being heaped on the former Fed chairman: Austan Goolsbee, chairman of President Barack Obama's Council of Economic Advisers from 2010 to 2011 and now a University of Chicago economics professor, wrote that it is "time for the critics to admit they were wrong" about Bernanke's tenure.
In a Wall Street Journal op-ed article, Goolsbee said Bernanke "got the warm reception he deserved" – a standing ovation – after his farewell address at the American Economic Association. If only this were true.
There is no question Bernanke took decisive action to bail out Wall Street, as both an advocate for the $700 billion Troubled Asset Relief Program and for the trillions of dollars in cheap loans the Fed made available to banks. The idea, of course, was to get these morally and financially destitute institutions back on their feet so they would make much-needed capital available to a shell-shocked Main Street.
But what did the rescue actually accomplish? Wall Street is definitely back, and better than ever. It is even safe to say the financial industry is entering a new Golden Era. Why? First, there is precious little competition. Where once there had been hundreds of Wall Street firms competing for the business of corporations, hedge funds and private-equity firms, now there is a small cartel.
With Lehman Brothers and Bear Stearns defunct, the former Merrill Lynch safely tucked inside Bank of America Corp., and Morgan Stanley shifting away from investment banking to asset management, does any client of Goldman Sachs Group Inc. really feel it has much choice?
In 2013, on almost $100 billion in revenue, JPMorgan Chase & Co. posted a "pre-provision" – that is, before one-time charges such as litigation expenses – net income of $26.1 billion. Actual net income was almost $18 billion.
This is stern stuff. In fact, it's like a dash of ice water to the face given the usual milquetoast pap being served when it comes to Bernanke. The article goes on to blast the low interest rates that Bernanke maintained even though asset bubbles are once again being expanded daily.
The article even provides us with a realistic analysis of what Bernanke has done to the rest of the US – the great middle class that does not work for Wall Street. These policies "have crushed savers and the tens of millions of retired Americans who must survive on a fixed income."
True enough. Bernanke's decision to buy some $85 billion of debt securities each month is not treated as "courageous" in this analysis, either. In fact, the article points out that by raising bond prices through artificial demand, the risk associated with US securities is surely mispriced, much as it was pre-2007.
The article ends by explaining what should be obvious … that it is "way too early for history to pass judgment on Bernanke's chairmanship. While he has restored the status quo and then some to Wall Street, he has left Main Street in a chronic state of fear and recession, with unacceptable levels of unemployment and virtually no growth in middle-class wages."
This is where we begin to part ways with this analysis – and that is only because the article has gone as far as it can (given its posting at Bloomberg) when it needs to go a lot further.
In fact, it is perfectly possible to pass judgment on Bernanke and his actions. Central banking is nothing but a large price-fixing scheme and Bernanke knows perfectly well that price-fixing always distorts the market and has unintended and negative consequences. It always creates a glut or a scarcity, and either of these situations is very grave when it comes to money stuff.
A scarcity of money can impoverish millions – billions – and further concentrate wealth in the hands of a few. A glut of money can provide a temporary euphoria, a false expectation of prosperity, before the inevitable bust sets in, resulting in impoverishment once again.
Bernanke knows full well – along with the rest of the world's central bankers – that booms always give way to busts and that the process of setting artificial prices for money only exacerbates natural economic cycles and turns them into agonizing epochs.
This boom, too, will give way to a bust. Only we have a suspicion that those fueling this boom with regulatory schemes and monetary manipulation intend for it to be the boom to end all booms – a final fiat money blow off that will drive markets sky high and create a whole new class of millionaires and billionaires.
But then, eventually, the market will collapse. The Wall Street Party will end in blood and tears. War and famine will stalk the land. The top men responsible for this state of affairs will offer increasing globalization as a panacea. A global central bank and global money will be held out as the solution.
This is what happened after World War II when the entire basis for world government was emplaced. Now all that is left is to elaborate on it. These internationalist institutions – the UN, IMF, World Bank, etc. – have endured through good times and bad. They have survived for a reason and are imbued with an internationalist purpose.
We doubt Bernanke's reputation will survive so long intact.